Essential Question:
How do you organize personal finances and use a budget to manage cash flow?
"Managing financials for a household can be overwhelming, especially when you consider the amount of monthly bills, receipts, paystubs, account statements, and other essential paperwork that is received by a household on a monthly basis. It’s easy to lose track of everything you need, but a good organizing system can keep things right at your fingertips.
Start out with your household filing system. It’s helpful to have folders set up for each major category—some examples include: health, job, banking, credit cards, taxes, brokerage, home, automobiles, insurance, major purchases, and other loans. On a weekly basis, go through your received mail file and sort everything into these folders. While some items can be thrown out (after being shredded), you will need to save insurance papers, receipts for major purchases, account statements, pay stubs, health forms and anything related to your taxes. Also create a folder for the current year taxes—as you have items you’ll need in April, add them to the file so they will be easy to access come tax time.
Household bills should be filed using a separate system. Bill books, which are available in office supply stores, are a great way to keep your bills organized. Sort your bills by due date and add them to the folder of the month they are due. You can also track bills in a personal finance program, spreadsheet, or an online service.
It’s best to pay household bills on a weekly basis, although if you only have a few bills, you can pay them bi-weekly or monthly. Online bill pay systems are a great way to stay organized, save money on stamps, and get your payments cleared quickly. Otherwise, you’ll need to make sure that you write and mail your checks well in advance of the due date so that you aren’t charged a late fee.
On a regular basis, either semi-annually or annually, go through each of your folders and clear out anything that is no longer needed. If any of the folders are getting too full, separate them out by year, and store newer information in the front of your file drawer, so that it’s more accessible.
While organizing can take some time in the beginning, having all of your financial information sorted appropriately will make day to day bill paying and home financial management easier for you."
" "Cash flow" management refers to the need to have cash come in -- flow in -- at the right times, so that it is available to flow out as needed. Everyone knows that if an organization has more expenses than income, sooner or later it will find itself in trouble. However, even if income matches or exceeds expenses in a given year, the cash from the income may not arrive in time to pay the bills as they come due. A cash shortage can be very disruptive to your ability to carry out your mission. To avoid disruptions of business or to take advantage of temporary cash surpluses, cash flow can and should be projected, monitored, and controlled.
Projections of receipts and expenditures, which comprise cash flow, are typically developed as part of the budget process, so that you can anticipate and develop strategies for funding the shortages or investing the surpluses. (Many of these strategies are described later in this response sheet.) Cash flow projections follow a format similar to your budget's. For each month, anticipate how much money you will receive and how much you will spend in each category.
To try this for the first time, you must look at your organization's prior year's checkbook as a basis for your cash flow projection for the coming year, adjusting for any anticipated changes that will affect the timing and amount of payments and deposits. These changes might include when your programs are offered, what programs are offered, new funding sources or expiration of previous funding, increases or reductions in interest rates, etc. While your new cash flow projection will largely correspond to your budget, some cash flow may come in from receivable from the prior year, cash may go out for payments made for last year's bills, and some income and expenses for the current year will be delayed until next year and, therefore, would not be included in the current year's cash flow budget.
As the year progresses, cash flow projections can be updated. By comparing budgeted cash flows to actual deposits and expenditures, and understanding the nature of any variances, you can strengthen your ability to accurately anticipate cash flow in the future.
Note: A cash flow budget or projection should not be confused with a financial statement called "Statement of Cash Flows." The statement describes changes in cash from year-to-year due to operating surpluses or deficits, makes adjustments for non-cash items such as depreciation, and shows increases or decreases in accounts payable and accounts receivable. This statement is usually prepared by your auditor along with other financial statements during the audit. (See Financial Management FAQ 25a:What Financial Statements are Nonprofits Required to Issue? for further information).
In a simple example, imagine an organization with no cash in the bank and a balanced budget, with $10,000 in revenue and $10,000 in expenses. If the income is received first, the organization will be able to spend it down as expenses are incurred. If, however, the expenses come in before the income, the organization cannot pay its bills until the cash is received. In this case, the organization has a problem with the timing of cash flow rather than a shortage of revenue or an excess in expenses.
In order to meet a projected temporary cash shortage, you may want to consider any of the following strategies:
Obtain a loan, usually from a bank or an individual such as a board or staff member.
Arrange for a line of credit from a bank.
Speed up the collection of receivables (money owed to you).
Move up the fundraising event or campaign you are planning.
Finance the purchase of equipment by leasing it or paying for it over time.
Liquidate investments.
Delay payments to vendors. This strategy is commonly followed in the corporate sector. Nonprofits are often reluctant to delay payments for fear of damaging the public trust or disappointing the vendor, who may be another small business person in the neighborhood. When you must delay payments to vendors, it is often advisable to explain the situation to them carefully, and let them know when they will be paid and how much will each payment be. You may even consider alerting vendors that bills incurred at certain times of year will always be paid. For example, you may experience a cash flow shortfall during the summer. You could negotiate up front with vendors that bills will be paid within thirty days during most of the year, but within ninety days during the summer.
Taking Advantage of a Projected Temporary Cash Surplus
To take advantage of a projected temporary cash surplus, your organization may:
Make short term investments in certificates of deposit, money market funds, or U.S. Treasury Bonds.
Buy supplies on sale that you will use over the course of the year.
In addition to reviewing your organization's revenue and expense budget, the board should review the organization's cash flow budget. The review should also include any measures related to managing cash flow which involve commitments on the part of your organization such as loans or revised terms with vendors.
ANY STUDENT DETERMINED TO HAVE VIOLATED EOSD AUP DURING SCHOOL HOURS OR WHILE USING SCHOOL EQUIPMENT WILL BE SUBJECT TO ANY CONSEQUENCE(S) SET FORTH BY EOSD, CLTCS AND/OR TECHNOLOGY LAB POLICIES AND RULES. ***
Planning & Money Management
Essential Question:How do you organize personal finances and use a budget to manage cash flow?
"Managing financials for a household can be overwhelming, especially when you consider the amount of monthly bills, receipts, paystubs, account statements, and other essential paperwork that is received by a household on a monthly basis. It’s easy to lose track of everything you need, but a good organizing system can keep things right at your fingertips.
Start out with your household filing system. It’s helpful to have folders set up for each major category—some examples include: health, job, banking, credit cards, taxes, brokerage, home, automobiles, insurance, major purchases, and other loans. On a weekly basis, go through your received mail file and sort everything into these folders. While some items can be thrown out (after being shredded), you will need to save insurance papers, receipts for major purchases, account statements, pay stubs, health forms and anything related to your taxes. Also create a folder for the current year taxes—as you have items you’ll need in April, add them to the file so they will be easy to access come tax time.
Household bills should be filed using a separate system. Bill books, which are available in office supply stores, are a great way to keep your bills organized. Sort your bills by due date and add them to the folder of the month they are due. You can also track bills in a personal finance program, spreadsheet, or an online service.
It’s best to pay household bills on a weekly basis, although if you only have a few bills, you can pay them bi-weekly or monthly. Online bill pay systems are a great way to stay organized, save money on stamps, and get your payments cleared quickly. Otherwise, you’ll need to make sure that you write and mail your checks well in advance of the due date so that you aren’t charged a late fee.
On a regular basis, either semi-annually or annually, go through each of your folders and clear out anything that is no longer needed. If any of the folders are getting too full, separate them out by year, and store newer information in the front of your file drawer, so that it’s more accessible.
While organizing can take some time in the beginning, having all of your financial information sorted appropriately will make day to day bill paying and home financial management easier for you."
http://www.moneymanagement.org/budgeting-tools/credit-articles/money-and-budgeting/just-for-you-family-cfo-how-to-organize-your-finances.aspx
" "Cash flow" management refers to the need to have cash come in -- flow in -- at the right times, so that it is available to flow out as needed. Everyone knows that if an organization has more expenses than income, sooner or later it will find itself in trouble. However, even if income matches or exceeds expenses in a given year, the cash from the income may not arrive in time to pay the bills as they come due. A cash shortage can be very disruptive to your ability to carry out your mission. To avoid disruptions of business or to take advantage of temporary cash surpluses, cash flow can and should be projected, monitored, and controlled.
Projections of receipts and expenditures, which comprise cash flow, are typically developed as part of the budget process, so that you can anticipate and develop strategies for funding the shortages or investing the surpluses. (Many of these strategies are described later in this response sheet.) Cash flow projections follow a format similar to your budget's. For each month, anticipate how much money you will receive and how much you will spend in each category.
To try this for the first time, you must look at your organization's prior year's checkbook as a basis for your cash flow projection for the coming year, adjusting for any anticipated changes that will affect the timing and amount of payments and deposits. These changes might include when your programs are offered, what programs are offered, new funding sources or expiration of previous funding, increases or reductions in interest rates, etc. While your new cash flow projection will largely correspond to your budget, some cash flow may come in from receivable from the prior year, cash may go out for payments made for last year's bills, and some income and expenses for the current year will be delayed until next year and, therefore, would not be included in the current year's cash flow budget.
As the year progresses, cash flow projections can be updated. By comparing budgeted cash flows to actual deposits and expenditures, and understanding the nature of any variances, you can strengthen your ability to accurately anticipate cash flow in the future.
Note: A cash flow budget or projection should not be confused with a financial statement called "Statement of Cash Flows." The statement describes changes in cash from year-to-year due to operating surpluses or deficits, makes adjustments for non-cash items such as depreciation, and shows increases or decreases in accounts payable and accounts receivable. This statement is usually prepared by your auditor along with other financial statements during the audit. (See Financial Management FAQ 25a:What Financial Statements are Nonprofits Required to Issue? for further information).
In a simple example, imagine an organization with no cash in the bank and a balanced budget, with $10,000 in revenue and $10,000 in expenses. If the income is received first, the organization will be able to spend it down as expenses are incurred. If, however, the expenses come in before the income, the organization cannot pay its bills until the cash is received. In this case, the organization has a problem with the timing of cash flow rather than a shortage of revenue or an excess in expenses.
In order to meet a projected temporary cash shortage, you may want to consider any of the following strategies:
Taking Advantage of a Projected Temporary Cash Surplus
To take advantage of a projected temporary cash surplus, your organization may:
- Make short term investments in certificates of deposit, money market funds, or U.S. Treasury Bonds.
- Buy supplies on sale that you will use over the course of the year.
In addition to reviewing your organization's revenue and expense budget, the board should review the organization's cash flow budget. The review should also include any measures related to managing cash flow which involve commitments on the part of your organization such as loans or revised terms with vendors.The Helpful Organization: Sample Cash Flow Budget
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http://eclkc.ohs.acf.hhs.gov/hslc/tta-system/operations/fiscal/financial-mgmt/payments/Whatiscashflow.htm
ALL WORK WILL BE GIVEN CREDITED TO ORIGINAL OWNER....AND WILL ALSO BE EITHER PARAPHRASED OR QUOTED TO WEBSITES.....ETC....
I used
http://www.feedthepig.org/savingstips
http://www.bankrate.com/calculators/savings/spending-investment-calculator.aspx
http://www.serve.gov/new-images/council/pdf/11_0104_goodwill_connecting.pdf
ANY STUDENT DETERMINED TO HAVE VIOLATED EOSD AUP DURING SCHOOL HOURS OR WHILE USING SCHOOL EQUIPMENT WILL BE SUBJECT TO ANY CONSEQUENCE(S) SET FORTH BY EOSD, CLTCS AND/OR TECHNOLOGY LAB POLICIES AND RULES. ***